The Gulf Coast Project: A Tar Sands Pipeline From the Outset

The Tar Sands Blockade wants to clear up the misconception that the Gulf Coast Project, or Phase 3 of the Keystone XL pipeline, will only be a crude oil pipeline when it is first constructed from Cushing, Okla. to Port Arthur, Texas.

The Keystone XL’s sister pipeline, Keystone 1, already carries tar sands to Cushing, and has been filling Cushing storage tanks with tar sands for more than a year now. This segment will be integrated into the existing Keystone Systems and will carry tar sands, according the U.S. State Department’s Environmental Impact Statement on the Keystone XL pipeline.

TransCanada’s own maps and documentation show that the Gulf Coast Segment will be integrated with Keystone 1 and will transport tar sands and contribute to tar sands
development. The evidence shows that this will not serve the public and will increase fuel prices. This project meets the demands of the shippers and the refineries and their export market, not the declining U.S public demand.

The Gulf Coast Project does not have a separate Environmental Impact Statement, and TransCanada is relying on the State Department’s highly flawed statement on the larger Keystone XL pipeline as it pertains to the Gulf Coast Project, despite the fact that several key issues relating to unique problems with Oklahoma and Texas waterways, among other issues, have yet to be evaluated at all.

TransCanada’s claims in advertisements that the Gulf Coast Project will ship American crude oil is a half-truth at best. Further research shows that TransCanada admits that they reserve only “up to 25%” of the lines capacity for domestic crude and the rest for Canadian crude (tar sands). But TransCanada won’t release, any specific number on exacty what that percent is. It could actually be only 1 percent.

We do not have any idea on what contract limits and time constraints would be involved in shipping domestic crude. If TransCanada has a contract to ship domestic crude, we do not know how much or for how long, but it allows them to make ambiguous and misleading statements such as “we will ship American crude.”

American crude is not what their customers, the refineries, are interested in. The market calls for heavy crude that can be hydrocracked into diesel.

“In our view, TRP’s [TransCanada Corporation] effort to advance the southern leg ahead of the larger (and more contentious) northern portion of (Keystone) XL is likely to speed up the regulatory process, which should ultimately allow the company to complete the proposed pipeline more quickly,” said Desjardins Securities analyst Pierre Lacroix in a note to clients.

“At the same time, TRP is also likely to be able to better serve shipper demand by placing the southern portion into service as rapidly as possible.”

Oilsands crude can get to the U.S. market now through TransCanada’s base Keystone System, which currently delivers crude to the U.S. Midwest and Cushing, and an extensive network of oil pipelines operated by rival Enbridge Inc.

Enbridge and TransCanada are not beyond working together to get tar sands crude to Cushing according to the Calgary Herald:

Observers are wondering just how TransCanada can keep its contracts with the refiners that primarily want diluted oilsands bitumen and with energy companies that are extracting the molasses-like crude from the ground in Alberta. The genesis of Keystone XL was when Gulf Coast refiners, worried about the end of crude supply contracts from Venezuela and Mexico (which would be heavy crude) approached TransCanada to build a line from Canada, company chief executive Russ Girling told me last year.

Some 15 refineries would have access to primarily heavy crude through Keystone XL, which would reach the massive Port Arthur refining hub through its endpoint in Nederland, Texas, and that’s the product they want, according to U.S. State Department documents. As of last summer, TransCanada customers had contracted 380,000 barrels per day of capacity on Keystone XL, out of 700,000 bpd.

When I asked Valero Energy Corp. spokesman Bill Day awhile ago whether the firm would shift support to Enbridge Inc. and Enterprise Products Partners LP’s Seaway pipeline from Cushing when it starts supplying the Gulf Coast this June, he maintained support for the Keystone XL project, noting Valero wants pipeline access to Canada.

Heavy oil supplies in Cushing are limited: there are just 155,000 barrels per day of Western Canadian crude contracted on the existing Keystone line from Hardisty into Cushing, according to the State Department, and there are another 100,000 barrels per day uncommitted from that original line, York says.

The consultant said there might be a creative way for TransCanada to bring additional heavy crude south to Cushing through Enbridge’s roughly 190,000 barrel-per-day Speerhead line from Flanagan, Ill., which is “running fairly empty,” with the crude originating in Alberta first moving through Enbridge’s Mainline to Illinois. It’s an interesting concept — competitors working together — but York points out that Enbridge has been supportive of Keystone XL, recognizing the regulatory risks exposed threaten the industry. “Maybe that dynamic gets them to work together.”

It is clear that both Enbridge and TransCanada want to please shippers and refiners, not the American public.

“We remain committed to building this overall project in a timely and efficient manner and to meet demand of shippers,” said TransCanada Chief Executive Officer Russ Girling told Bloomberg News.

The “Gulf Coast Project” remains as much a threat to the climate as the cross-border segment of the pipeline coming in from Canada. The public has been left in the dark about the Keystone 1 pipeline and its relationship to the Gulf Coast Project–just another reason why the Tar Sands Blockade is resisting TransCanada’s lies and intimidation.

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